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Constructive dismissal, unemployment during COVID-19

Wednesday, May 20, 2020 @ 1:51 PM | By Sean O’Donnell

Sean O'Donnell %>
Sean O'Donnell
Because COVID-19 is a national and global health crisis, with the potential to bring about significant economic turmoil, many businesses are being forced (or may be forced soon) to temporarily lay off their employees.

Temporary layoffs are a crucial part of employment law and one that is often misunderstood by most employees (and some employers). If an employment agreement, or another written agreement in advance of the layoff, provides a right to an employer to effect temporary layoffs, then employers facing a slowdown or shutdown may be able to avail themselves of the temporary layoff provision as outlined in the Ontario Employment Standards Act, 2000 (ESA). A temporary layoff can last no more than 13 weeks in any 20-consecutive week period, or provided that certain conditions are met (e.g. the employee continues to receive benefits during the period), the temporary layoff can be no more than 35 weeks in a 52-week period.

Alternatively, if employers have failed to include a temporary layoff provision in their employment agreements, or another written agreement in advance of the layoff, the contractual right to lay off employees does not exist, and therefore employees are considered to be constructively dismissed upon layoff and employers may be obligated to provide reasonable notice or pay in lieu of notice, in addition to any required statutory severance pay. Where the temporary layoff is longer than the periods outlined in the ESA, the temporary layoff is deemed to be a termination.

Accordingly, while many employees have temporarily been laid off due to the COVID-19 pandemic, a likely majority of those same individuals will not have a temporary layoff provision, making the layoff a potential constructive dismissal, or wrongful dismissal. Going about this, however, is where things get interesting.

Unlike in typical circumstances where Canada’s economy is operating at full capacity, COVID-19 has caused those who have been temporarily laid off to think twice about making a constructive dismissal claim. Inherent in all constructive dismissal claims is the risk to forgo potentially secure employment upon the lapse of the temporary layoff period in exchange for the chance at a severance package and alternative employment found somewhere else.

Prior to COVID-19, quitting one’s employment and claiming constructive dismissal still came with a high risk. The employee, if unsuccessful, will be deemed to have resigned from their employment, thus disentitling them to any potential severance, employment insurance (EI), in addition to potentially having to pay for the employer’s legal costs.

Amidst COVID-19, quitting one’s employment after being laid off and claiming constructive dismissal could run an even higher risk. If an employee is unsuccessful, not only will the above-mentioned risks apply, but so too will the weakened job market impact an employee’s ability to find comparable employment — leaving the client potentially more exposed. It is no secret that most companies are not hiring right now. The fact remains that the unemployment rate has skyrocketed, with millions of Canadians being affected by either unemployment, reduced hours or temporary layoffs.

However, despite the doom and gloom of today’s new reality, certain industries are hiring and doing so in large numbers to help keep up with the increased demand. For example, the pharmaceutical industry, teleworking software companies, food-chain suppliers and technical support roles are all having an increased need for qualified workers.

Therefore, whether constructive dismissal is appropriate for a client depends on a range of individual factors, including the client’s industry, transferable skills and the status of the overall market economy.

Canada’s market economy is changing at a rapid pace, and the jobs that fuel it are being impacted equally as fast. When making a constructive dismissal claim, employment lawyers need to consider all surrounding circumstances in order to properly advise their client. Depending on the industry at issue, coupled with the skillset of the particular client, constructive dismissal claims could be a more, or less, viable option. It appears that constructive dismissal strategy will be moving in lockstep with industry, with the economy and with the mobility of the particular client. This is where lawyers can truly earn their value.

There is no “one-size-fits-all” advice, especially when it comes to the fluid nature of this pandemic and the immense importance of an individual’s employment. While current circumstances have altered the approach to constructive dismissal claims, this is not to say that it is inappropriate in certain circumstances, as many factors are involved.

Ultimately, the threat and the uncertainty will end, and our lives and businesses will return to normal. Until then, employment lawyers are rethinking their approaches to constructive dismissal claims in response to today’s “new reality.”

This is part two of a two-part series. Part one: Constructive dismissal: New reality under COVID-19.

Sean O’Donnell is an advocate at SJOLegal with extensive experience in employment, human rights and civil litigation, having practised for Canada’s leading litigation firms in these areas, among myriad other areas of law. He was called to the bar in 2010. This article was written with the assistance of Carter G. Perks, student-at-law.

Photo credit / rudall30 ISTOCKPHOTO.COM

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